Three years ago, a trio of companies submitted written proposals for a public grant to overhaul a historic hotel in Miami’s Overtown neighborhood. The lowest bidder won.
On paper, it looked like an unremarkable competitive bid process held to ensure taxpayers were getting good quality for a low price.
But a closer look at the $850,000 deal raises many of the same concerns a Miami-Dade grand jury found when it issued a report last year warning of “cronyism” and “collusion” in the loosely regulated agencies tasked with breathing life into the state’s poorest neighborhoods with public money.
The winning bidder was Odua Group, a one-man construction management firm company run by politically connected consultant Ola Aluko. But to do the actual work on the hotel, Aluko promptly hired Mastermind Construction, one of the bid “losers” – whose longtime business partner, Palm Construction and Design Group, submitted the third bid on the project.
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The three companies have, in fact, worked together on an array of public and private development projects over the years, including the troubled Town Park Plaza North renovation chronicled earlier this year by the Miami Herald. Concerns raised by the coverage have spurred the Southeast Overtown Park West Community Redevelopment Agency to re-examine its grant for the hotel, though executives defend giving out the money.
“We try to do everything, as much as we can, by the book,” said Clarence Woods III, the CRA’s executive director. “At this point, we have no reason to believe there was anything done that was improper. But we are doing an audit and reviewing” the project.
Aluko, who was also the head of an affordable housing non-profit and remains under criminal investigation over a land deal unrelated to the hotel, did not return repeated calls, e-mails or texts. The non-profit he led, St. John Community Development Corp., let his contract lapse this month following a Miami Herald investigation into his work and compensation.
Whether taxpayers are getting their money’s worth for what’s known as the Josephine and Dunn Hotel remains up in the air.
The renovation and conversion of the crumbling hotel into a boutique 18-unit bed and breakfast was supposed to be done in six months. As of late May, nearly three years after groundbreaking, the CRA has shelled out $600,000 to Odua Group for the hotel – which today remains vacant and far from completion.
Woods says the timeline and cost of the project are beyond what was originally conceived, but attributes those problems to pricey and time-consuming complications workers found when they began work on the two buildings, built in 1938 and 1947. He concedes that the project is on track to run about $100,000 over-budget, but insists the public “got a pretty good value.”
“Whether the relationship between Ola [Aluko] and those other two guys who submitted proposals, whether that affected the pricing? I don’t think we’re paying too much.”
Community redevelopment agencies across Florida have touted successes to combat “slum and blight,” but how the agencies dole out money has long been criticized. Just a couple months ago, lawmakers considered a bill that, had it passed, would have gotten rid of CRAs.
The state-authorized agencies are allowed to divert certain property taxes from general services like police and transit, in order to focus spending within their boundaries. The idea is to spur private investment in downtrodden neighborhoods.
But locally, CRAs have been criticized for subsidizing museums, concert halls and a production studio in downtown Miami, and even to cover county cultural expenses as it pursued funding for Marlins Park. Last year, a Miami-Dade grand jury issued a report slamming how CRAs operate, saying elected officials sometimes appear to use them as “slush funds” to fund pet projects. The grand jury also noted that under state law, CRAs are not required to have formal bidding rules.
CRA supporters say fewer restrictions allows for grants to be distributed more quickly, cutting through red tape and encouraging businesses to invest in struggling neighborhoods. But the grand jury report said “such lax laws and regulations are fraught with dangers of cronyism, collusion, inflated or exorbitant costs as well as other issues that lead to corrupt practices.”
The Overtown hotel proposals, submitted by longtime business associates, are troubling because “even as a lay person, it does not look like an arms-length transaction by competitors,” said Frank Schnidman, a CRA expert who was a witness for the grand jury.
But it can’t be called bid rigging or collusion, he said. “You can’t say it’s inappropriate if there are no rules to to say it’s inappropriate,” said Schnidman, a professor at Florida Atlantic University.
The complex at 1028 NW Third Ave was actually two hotels — the Josephine and the Dunn — that catered to the flourishing black neighborhood in the 1940s and ’50s. It was an era of segregation, when African-American entertainers playing in Miami had few options but Overtown for lodging.
But as Overtown’s fortunes faded, the two buildings fell into disrepair. The property was bought in 2003 by Shirlene Ingraham, the owner of Jackson’s Soul Food, another historic business in the predominately African-American neighborhood recently renovated with the help of a previous $1 million CRA grant.
On March 18, 2014, Ingraham sent a proposal letter to Woods, the CRA’s executive director. Her plan: to turn the vacant buildings into a 18-room bed-and-breakfast lodge, restoring “the essence that was once realized and enjoyed during the hay day of Overtown’s success.”
Had the grant been arranged directly through a municipal government, the bids might have been sent to directly to a public officials, with competitors forbidden from talking to each other to avoid any inflating of the proposals.
But Overtown’s CRA instead asked Ingraham herself to obtain – and decide on – pricing proposals based off an architect’s plans in order to ensure the grant was appropriate.
All the proposals came back dated within days of each other: One from Odua Group for $820,000, the second from Mastermind Construction for $890,5000 and the third from Palm Construction and Design Group for $955,000. Each offered to gut the inside of the two-building hotel reconfiguring all the rooms, repairing or replacing everything from the balcony rails, electric fixtures to the awnings.
Woods, of the CRA, told the Miami Herald that he had no idea at the time that Odua worked with Mastermind and Palm.
Records, however, show that Aluko, as president of the non-profit St. John Community Development, had already tapped Mastermind and Palm to work on numerous taxpayer-funded projects in the previous years. Aluko’s private firm, Odua Group, also got paid on at least three of those projects, though those were not funded through the CRA.
And Aluko, one day before Ingraham’s letter to the CRA, submitted a proposal for the massive Town Park Plaza North project – naming Mastermind and its president, Timothy Smathers, as part of his team.
Reached by phone last week, Smathers claimed he had no idea Odua and Palm were also bidding for the Dunn Hotel renovation. He chalked it up as a coincidence.
“I heard about the job through the owner,” Smathers said. “They have a list of contractors down at the CRA. I got a phone call from her and went and gave her a estimate and that was it.”
When Smathers asked if he was doing business with Odua and Palm at the time of the bid, he appeared to hang up. He did not return follow-up phone calls or a text message.
Carlos Rolle, the head of Palm Construction and Design Group, also hung up the phone when contacted by the Herald. He and Smathers are longtime business partners, having previously started at least six companies together.
Ingraham did not return phone calls from the Herald. Reporters who visited Jackson Soul Food were told to call an attorney, who responded that he was not representing Ingraham on the hotel project.
The CRA approved the grant less than two weeks after Ingraham’s request A few months later, a contract was signed with her company, JEJ Properties, with Aluko signing as a witness. In October 2014, the city held a ceremonial groundbreaking ceremony. Among those wearing hard hats, wielding shovels for the photo opp: Woods, Aluko, Ingraham and Miami Commissioner Keon Hardemon, the chairman of the CRA.
Today, the building’s entrance remains boarded up. A small group of workers milled about last week inside an interior that has new windows but lacks dry wall, floors, or any sign of fixtures and electric work. Doors and treated plywood were stacked in rooms, leaning against unpainted walls.
Exactly when the project will be done remains unclear. Woods said the CRA has informed Ingraham that she’ll likely need to contribute more money toward the project, and the agency is now reviewing its grant agreement with the hotel’s owner. The reason: the Miami Herald reported that Aluko is under criminal investigation over an unrelated land deal.
Despite the hotel project’s woes, city leaders have high hopes. Miami City Commissioner Keon Hardemon, the CRA’s chairman, told a radio station last week that the bed-and-breakfast will be a unique addition to Overtown.
“Themed rooms. Black management. Black ownership,” he said this month during an appearance on the CRA’s half-hour radio program, “The Redevelopment,” on WMBM 1490. “An experience you can’t get anywhere else.”